SUHAIFA ESSOP 210 531 640 ANALYSIS OF THE EVOLUTION OF …

SUHAIFA ESSOP

210 531 640

ANALYSIS OF THE EVOLUTION OF THE APPRAISAL AND OPPRESSION REMEDY

AND ITS ADOPTION UNDER THE COMPANIES ACT IN SOUTH AFRICA.

A mini-dissertation submitted in partial fulfilment of the requirements for the degree of

MASTER OF BUSINESS LAW

In the Graduate School of Law

Supervisor: Darren Subramanien

ii

DECLARATION

I, Suhaifa Essop, hereby declare that the work contained herein is entirely my own, except where

indicated in the text itself, and that this work has not been submitted in full or partial fulfilment

of the academic requirements of any other degree or qualification at any other University.

I further declare that this dissertation reflects the law as at the date of signature hereof.

This project is an original piece of work which is made available for photocopying and for inter-

library loan.

Signed and dated at Pietermaritzburg on the day of November 2018.

iii

ACKNOWLEDGEMENTS

I am grateful to the Almighty God for making this journey possible. To my parents and loving

husband to whom I am truly thankful to for all the support and words of encouragement during

this time. I would like to thank my dear friend Nikolai for the support he has given me

throughout this journey. To my supervisor Advocate Subramanien, thank you for your guidance,

patience and direction. You have all made this it possible for this degree to be completed, and I

am eternally grateful.

iv

ABSTRACT

The Companies Act 71 of 2008 encapsulates the economic sphere, its procedures, problems and

possible resolutions to such issues on a wide scale. It allows a litigant a basis and a guideline

when dealing with corporate law in relation to the corporate sector. The main idea is to allow

free, fair and prosperous trade not only for the majority shareholders but also for the minorities

and the financial environment as a whole. Every shareholder who has invested in a company

needs to be given the opportunity to be a part of a concern in which (s)he has full confidence and

reliance on the controlling members. The issue arises when the aforementioned is not complied

with whether it is a large corporation or a small start-up business. There are several remedies

which can be used as a means of restitution, however, for purposes of this dissertation we shall

analyse two controversial and expanded remedies, namely the Appraisal and Oppression

remedies. This dissertation focuses on the two by analyzing the introduction of the Appraisal

remedyand its source of adoption and the development of the Oppression remedy with the main

aim of answering the questions of whether, firstly, these remedies are warranted in South Africa

and, secondly, whether or not further expansion is required for their proper functioning.

v

TABLE OF CONTENTS

DECLARATION………………………………………………………………………………. ii

ACKNOWLEDGEMENTS…………………………………………………………….……...iii

ABSTRACT……………………………………………………………………………………. iv

TABLE OF CONTENTS……………………………………………………………………v - vi

CHAPTER 1: INTRODUCTION ……………………………………………………………. 7

I.1. Brief background of the past and future protection under the Appraisal and

Oppression remedy……....…………………………………………………………...8

CHAPTER 2: OPPRESSION REMEDY……………………………………………….…….8

2.1. The need for reform ………………………………………………………………...8

2.2. The aim and purpose of legislature …………………………………………………9

2.3. Oppression Remedy ………………………………………………………………...11

2.3.1 Overview of the Oppression Remedy under the 1926 Act and the Old

Companies Act. ………………………………………………………………….11

2.3.2 Oppression Remedy developed under the Company Act 71 of 2008……...14

2.3.2.1. Applicants who can apply under s163 ………………………….17

2.3.2.2. Conduct – Analysis of domestic and international legislature….20

2.3.2.3. Remedies available to the court to rectify the misconduct……...24

2.4. Conclusion ………………………………………………………………………….25

CHAPTER 3: APPRAISAL RIGHTS AND DISSENTING SHAREHOLDERS …….26

3.1 Introduction and Origin …………………………………………………………….26

3.2 Appraisal remedy and its application under s164 ………………………………….29

3.3 Trigger Events to initiate the Appraisal right……….………………………………31

3.4 Procedural requirements of the Appraisal remedy….…………………………........32

3.4.1 Legal Standing …………………………………………………………...33

vi

3.4. 2 Notice of the right ………………………………………………………...36

3.4. 3 Notice of objection by dissenting shareholder(s)………………………….37

3.4. 4 Notice of adoption of the resolution………………………………………39

3.4. 5 Demand …………………………………………………………………...39

3.4. 6 Offer by the company …………………………………………………….41

3.4. 7 Acceptance of the offer…………………………………………………....42

3.4. 7 Determination of ‗Fair Market Value‘…………………………………….43

3.5 Conclusion ………………………………………………………………………….44

CHAPTER 4: CONCLUSION AND RECOMMENDATION ……………………………...46

4.1. The extension of the Oppression remedy……………………………………………...46

4.1.2 Recommendations …………………………………………………………………...50

4.2 The inclusion of the Appraisal remedy............................................................................51

BIBLIOGRAPHY………………………………………………………...................................55

JOURNAL ARTICLES…………………………………………………………………………55

BOOKS………………………………………………………………………………………….56

CASE LAW……………………………………………………………………………………..56

WEBSITES………………………………………………………………………………….......58

STATUTES……………………………………………………………………………………...58

1

CHAPTER 1: INTRODUCTION

It was stated by Samuel Adams that

It does not require a majority to prevail but rather an irate, tireless minority keen to set fires in peoples

mind.1

People venture into business with the goal of acquiring profit to acquire a better quality of life. It

allows them to be a part of a greater purpose and influence the business sector they intend

entering. All companies are uniquely designed and structured to suit the needs and wants of the

different shareholders, dependent on their respective buy-in capabilities and financial

contribution(s).2

Once the purchase of shares is concluded, each shareholder is broadly divided into two

categories; namely, the Majority and Minority shareholder(s). This then creates a power struggle

between them, either on an individual or a collective level when dealing with the running of the

company and the principles and policy decisions that are incorporated to do so.

Companies are being incorporated on a daily basis and the desire for the furtherance of one‘s

own needs can make a person who has ultimate power, in this case the majority shareholder(s),

to make decisions that adversely affect the minority. This gain comes at a heavy cost as

shareholders lose faith not only in the company, but the law itself.

The New Companies Act 71 of 2008 (hereinafter referred to as the ―the New Act‖) sought to

redress the problems that have plagued the corporate sector when dealing with the relief that can

be sought by aggrieved minority shareholders. It sets out several actions that can be taken against

the oppressive, unfair or prejudicial conduct or omission by the majority.

The aim of this research was to set out the remedies and go into detail when dealing with two

very important remedies that have an adverse effect on not only the member(s) but also the

company and the economic sector as a whole.

1 Quote by Samel Adams available at https://www.goodreads.com/author/quotes/31693.Samuel_Adams , accessed

on 23 October 2018. 2 FHI Cassim et al Contemporary Company Law 2 ed (2012) 3-8.

https://www.goodreads.com/author/quotes/31693.Samuel_Adams

2

The need for such protection arises from the fact that South Africa is an emerging third-world

country that has foreign investors and shareholders, whether it is by a majority or the minority

shareholding. Thus, the protection of the minority and the control of the majority‘s action are

very important for continuous, stable and progressive economic growth.

This dissertation gives a brief history of the Companies Act in South Africa and how it was

incorporated by looking briefly at English law and the Oppression remedy as well as critically

analysing two remedial actions that are available to a minority shareholder; namely, the

Appraisal remedy found in the New Act3 section 164 and the Oppression remedy under section

163 and comparing the changes and amendments made from its predecessor acts; namely

Companies Act4 (hereinafter referred to as ―the Old Act‖) s252 and its earliest foundation in

section 111bis the Companies Act5 (hereinafter referred to as the ― the 1926 Act‖).

The rationale behind this study was to give an in-depth analysis of the evolution of the

Companies Act with regards to the protection that it affords the minority shareholder. It will

endeavor to clearly outline two remedies available and the problems that are associated with

them. The research briefly touches on the position in English law and Canadian law to discern if

the Oppression remedy that was copied from the English law is warranted in South Africa.

The conclusion of this study sought to provide a brief outline of any problems that the remedies

still encounter as stated by academic writers and whether or not there is a need for legislature to

step in and develop the law further and/or give clarity to these problems.

3 Companies Act 71 of 2008.



3

1.1. Brief background of the past and future protection under the Appraisal and

Oppression remedy

The current position in South African company law can be seen as a step in the right direction as

it provides minority shareholders a number of remedies that can be found in the New Act.6 The

two remedies that this research explores are the Appraisal7 and the Oppression

8 remedies.

The Appraisal right has been introduced for the first time under the New Act.9 It affords a

minority shareholder to offer the majority an opportunity to buy out his/her shares when (s)he

does not agree to a resolution that is to be passed if (s)he feels that the passing of the resolution

will adversely affect his/her rights or interests in the company.10

Once the resolution has been passed, it must be communicated, within ten days, after it was

taken to all shareholders, including those who objected to the resolution, and within that time

frame, have neither withdrawn the notice nor voted in favour of the resolution.11

Thereafter, the minority shareholder may exercise this right by demanding the company to

purchase his/her shares within twenty days of receiving communication of the resolution being

passed12

or if this was not communicated, within twenty days of becoming aware of the

resolution.13

As can be deduced from above, company law not only regulates the formation of a company but

caters for the situation of dissatisfaction in various ways.14

It allows for the restitution of those

aggrieved individuals or collectives who have been metaphorically ‗shut out‘ of crucial or

mundane decision making by the majority vote.15

The research looks at the evolution of the remedies and the way courts have interpreted it and

briefly touches on the intention of legislature when drafting the New Act. It will further evaluate


7 Section 164 of Act 71 of 2008.

8 Section 163 of Act 71 of 2008.


10 Sections 164 (1)-(3) of Act 71 of 2008.

11 Section 164(4) of Act 71 of 2008.

12 Section 164(5) of Act 71of 2008.

13 Section 164(7) of Act 71 of 2008.

14 FHI Cassim et al op cit note 2 at 8.

15 Ibid at 796.

4

how academic writers and courts have interpreted the requirements of the section dealing with

the Oppression remedy16

and the Appraisal remedy when defining fair market value.17

This will

lead to the conclusion which seeks to address the question of what aspects of the two sections

need further development and/or clarification by legislature.

The starting point for determining protection of minority shareholders would be to critically

analyse the rules set out by the New Act and the Memorandum of Incorporation (MoI) of the

company which will provide details as to the class of shares and preferences, the rights and

limitations and other terms associated with the class of shares or, in the event that a company has

a shareholder‘s agreement, the shareholder agreement.18

The 1926 Act required there to be a breakdown of the relationship between the parties, as this

was seen as a good cause for winding up the business however, winding up was the only remedy

available to the shareholders. Other factors that were taken into consideration were the merits of

the matter, law justice and equity.19

This was problematic when it came to public companies as

opposed to private companies who had a strong relationship that was easily determinable and so

was the breakdown. The 1926 Act was later repealed and the Oppression remedy had seen

substantial development.20

The position under the Old Act was rather onerous on the minority shareholder, and in order to

elicit any relief the Act of 1973 stated the following:

‗Any member of a company who complains that any particular act or omission of a company is

unfairly prejudicial, unjust or inequitable, or that the affairs of the company are being conducted

in a manner unfairly prejudicial, unjust or inequitable to him or to some part of the members of

the company, may, make an application to court for an order under this section‘.21

Apart from the court not willing to grant these orders readily, this section was onerous and

limited due to the wording, as the minority shareholder bore the onus of proof to be able to attain

16

Section (1) (a)-(c) of Act 71of 2008. 17

Section 164(5) of Act 71of 2008. 18

FHI Cassim et al op cit note 2. 19

A Sibanda ‗Advancing the statutory remedy for unfair prejudice in South African company law: Perspectives

from international jurisprudence‘(2015) 27(3) SA Mercantile Law Journal 405. 20

Ibid. 21

Section 252(1) of Act 61 of 1973.

5

satisfaction from the court to prove that the conduct was unfair or prejudicial to him by the

majority as the minority.22

In the Garden Province Investment and Others v Aleph (Pty) Ltd and Others (Garden

Province)23

, the court further held that apart from proving the conduct and the effect of the

conduct, s252 of the Old Act required the applicant be a member of the company at the time of

the alleged conduct. This had caused problems for applicants who were not members at the time

but who were aware of unfair practices by the majority pending his/her appointment.

The Oppression Remedy under s163 of the New Act is broader and allows the court to make any

order in terms of s163(2)(a) -(i) which will be explained fully in the dissertation. The

requirements for relief under this section have now developed drastically as it now allows an

applicant to seek court assistance even if the conduct is not only unfair and/or prejudicial to the

minority shareholders but, now includes the applicant solely. This leads to the next remedial

process that a minority shareholder can procure.

The Appraisal remedy under s164 of the New Act allows a minority shareholder to avoid further

prejudice by affording the majority an opportunity to ‗buy him out‘ purchasing his shares for a

fair market value. There has been debate as to the determination of fair market price which will

be addressed further in the dissertation.

The New Act sought to address the need for broader more effective protection for the minority,

notwithstanding the need for discretion and certainty. Therefore, several remedies which can be

used against oppressive majority rule behavior have been put into place by the legislature.

The exercise of the Appraisal right requires the company to make offers, of a fair market value,

to all shareholders who objected to the passing of the resolution, and these offers should last for a

period of 30 days. Failing acceptance, within the time frame, the offer lapses.24

In a policy paper that was published by the Department of Trade and Industry the main emphasis

of the New Act was echoed. The paper titled South African Company Law for the 21st Century:

22

Ibid. 23

Garden Province Investment & others v Aleph (Pty) Ltd & others 1979 (2) SA 525 (d) 531. 24


6

Guidelines for Corporate Law Reform25

stated that the main aim was to afford the minority

shareholder the exercise of their basic right and the ability to exit a company, after making an

informed decision, by allowing the majority the opportunity to buy his shares when he/she is

unable to influence the decisions of the majority.26

The Appraisal remedy is considered by some as a means of softening the provisions in company

legislation which allow majority shareholders, or a group of connected shareholders, to effect

fundamental changes27

however, these changes will come at the fair price of buying out the

minority for a fair market value.

The above illustrates a fair and fundamental change brought about by the New Act and even

though the intention of protection is heavily emphasized upon, this draws towards the research

question as to how a fair market value is determined and how courts have interpreted this when

dealing with cases.

The Oppression remedy in the New Act has seen much development since its predecessory

Act.28

The remedy is now broader as it allows minority shareholders seeking relief to apply to

the court for an appropriate order by placing a less onerous requirement on the applicant.

In terms of the New Act, a shareholder or director may apply to the court if any act or omission

of the company or any related person has had a result that is:

1) oppressive or unfairly prejudicial to or that unfairly disregards the interest of the

applicant;

2) or the business is being conducted in a manner that is oppressive or prejudicial to the

applicant;

3) or the powers of a director or prescribed officer is being exercised in a manner that is

oppressive or prejudicial to the applicant.29

25

South African company law for the 21st century guidelines for corporate law reform in GN 1183 GG 2649 3 of 23

June 2004. 26

Ibid. 27

B Manning ‗The shareholder‘s appraisal remedy: An essay for Frank Coker‘ (1962) 72(22) Yale Law Journal 226. 28

Section 252 of Act 61 of 973. 29

Section 163 (a)- (c) of Act 71 of 2008.

7

As a comparison to the Old Act, there is a less onerous requirement for the applicant to prove to

the court to find redress under this section. The applicant only has to prove that the conduct is

prejudicial to him/her and his/her interests and not that the conduct or omission brought about by

the majority is directed at him as a minority.30

The New Act‘s development now offers a wide-range of relief in the event of oppressive or

unfairly prejudicial conduct in two ways. It makes provisions for not just a shareholder but also

for a director to complain and access the remedy in respect of oppressive conduct31

and allows a

court to make a wide range of orders that it deems appropriate in the circumstance, which is a far

more extensive list32

than those found in s252 of the Old Act.33

The above brings us to the research question of how courts have interpreted the requirements and

its application when dealing with a specific set of facts and whether its inclusion is warranted in

South African law.

30

Section 252(1) of Act 61 of 1973. 31

Section 164 (2) of Act 71 of 2008. 32

Sections 163(2) (a)- (l) of Act 71 of 2008. 33

Companies Act 61 of 1973.

8

CHAPTER 2: OPPRESSION REMEDY

The writer submits that one might argue when a shareholder buys or invests in the title of being a

minority shareholder, that she expressly and/or tacitly binds themselves to the idea that (s)he will

have minimal input and/or influence when it comes to decision making process. Thus, (s)he shall

be a so-called ‗silent investor‘ in the eyes of the majority, due to their inability and lack of voting

capacity to challenge a majority resolution.

The above is not as far-fetched as it seems. The objective of the New Companies Act34

was to

counter the above idea and make the economic environment accessible to all companies

regardless of size and to ensure that they are adaptive, innovative and internationally

competitive.35

Company law is premised on the grounds that those who have controlling powers in a company

need to carry on business and conduct its affairs in a manner that is not prejudicial or unfair to

those shareholders or members that lack such capacity.36

It should be noted at the forefront that when the majority makes a decision and it is done in

accordance with the law37

it is not challengeable and the shareholders cannot unilaterally

withdraw solely on the basis that their personal expectations are not met.38

This, in essence,

means that the majority needs to act bona fide and in a manner that has the outcome of

benefitting the company as a whole.39

2.1. The Need for Reform

South African Company law has existed since 1861, dating back to a predecessor piece of

legislation, the Joint Stock Companies Limited Liabilities Act no 23 of 1861 of the Cape Colony,

which was equivalent to English law.40

Since then, the Companies Act in South Africa has seen

development and reform as well as individuality, thus distancing itself from English law by

34

Act 71 of 2008. 35

South African company law for the 21st century guidelines for corporate law reform op cit note 25 at 8. 36

Aspek Pipe Co (Pty) Ltd v Mauerberger 1968 (1) SA 517 (c) at 525. 37

Ben- Tovim v Ben-Tovin 2001 (3) SA 1074 (ac) at 1092; see Donaldson Investments (Pty) Ltd & others v Anglo-

Transvaal Colliers Ltd & others 1980 (4) SA 204 (T) at 209. 38

Barnard v Carl Greaves Brokers (Pty) Ltd 2008 (3) SA 663 (c) at 526. 39

Gunderfinger v African Textile Manufacturers Ltd 1939 AD 314 at 324-325. 40

South African company law for the 21st century guidelines for corporate law reform op cit note 35.

9

finding its own, more appropriate, direction. Using English law as a guide instead of a

precedent.41

The largest departure from English law can be seen by the enactment of the Close Corporation

Act, No 69 of 1984.42

This was an English Policy paper that was never used in the UK but was

adopted in South Africa, which shows not only development in our law but further illustrates the

economic differences between the two countries.43

The aim of the Close Corporation Act44

was

to assist smaller businesses by means of an affordable yet effective alternative to ensure

economic growth for our country by encouraging and equipping entrepreneurs with an

inexpensive legal framework.45

Individuality and appropriateness are vital and crucial based on South Africa‘s economic, social

and political differences when it comes to legislating in a country.

2.2. The Aim and Purpose of Legislature

Drafters of the New Company Act46

encountered, as stated above, the task of balancing the

encouragement of foreign investment while offering shareholders every possible form of

protection should their rights be infringed.47

Shareholder remedies can be found in Chapter 7 of the New Companies Act,48

however, for

purposes of this dissertation two remedial actions were analyzed; The Appraisal and Oppression

remedies.

The Appraisal and Oppression remedies are two remedial actions that can be found under

sections 164 and 163 of the New Companies Act.49

These are the most used remedies by

minority shareholders and authors have stated that the reason for this is that it finds application

by smaller private companies whereby shareholders play a more active role in the running of the

41

South African company law for the 21st century guidelines for corporate law reform op cit note 25 at 12. 42

Ibid. 43

Ibid. 44

Close Corporation Act 69 of 1984. 45

South African company law for the 21st century guidelines for corporate law reform op cit note 41. 46

Act 71 of 2008. 47

J Yeats ‗Putting appraisal rights into perspective‘ 2014 Stell LR 331. 48

Act 71 of 2008. 49

Ibid.

10

company.50

This shall therefore be discussed in detail and analysed to answer the research

question as to whether such protection is sufficient and warranted in South Africa.

We start looking at the Oppression remedy, as this can also be found in the Old Act51

and has

seen much development under the New Act52

due to its previous stringent requirements and

narrow application.

The existence of minority shareholders gives rise to the remedies in company law at their

disposal. As stated above, the purpose of these remedies is to protect and enforce their rights as

shareholders and as being part of a decision-making process, which can be undermined by a

majority.53

This protection is afforded if they have reasonable grounds to believe that their

interests have been violated or oppressed by the directors or by the majority shareholders.54

The reason behind the abuse of minority shareholders can be found in the Majority Rule

principle in the governance of companies.55

This is what company law in South Africa seeks to

address. It seeks to provide a statutory medium for court intervention and a solution to the non-

judicial intervention principle in corporate management, thus causing the majority rule principle

to be subject to judicial intervention.56

However, it should be noted that courts will not likely

interfere with managerial operations of a company - instead, electing to allow the controlling

members to operate with minimal unwarranted minority interference.57

Courts have followed the view that the conduct the applicant complains of needs to be weighed

up against the majority rule principle to ascertain whether or not the conduct falls within the

definition of unfairly prejudicial, inequitable or unjust.58

50

FHI Cassim et al op cit note 2 at 758. 51


Act 71 of 2008. 53

A Sibanda op cit note 19 at 401. 54

Ibid. 55

A Sibanda op cit note 53. 56

Ibid 57

MJ Oosthuisen ‗Statutere minderheidsbeskerming in die maatskappyereg‘ 1981 Journal of South African Law

105. 58

Aspek supra note 36 at 529.

11

2.3. Oppression Remedy

2.3.1. Overview of the Oppression Remedy Under the 1926 Act and the Old Companies Act

The need for protection of shareholders has always been a concern and the efforts to address this

in South African law dates back to 1926.59

This was when s111bis of the 1926 Act60

was enacted

and was adopted from English law; namely, s210 of the English Companies Act of 1948.61

The

Oppression remedy is also prevalent in other jurisdictions with the main focus on protecting the

minority and aggrieved shareholders who have little to no recourse.62

Prior to the Oppression remedy, aggrieved parties used s117 of the 1926 Act,63

however, the use

of this section meant that the company would be under compulsory winding-up if the applicant

was successful. This did not only have repercussions for the majority but for the minority as

well.64

This form of remedial action was also found under s111bis and its application can be found in

the Moosa NO v Mavjee Bhawan (Moosa)65

case whereby the court stated:

‗An irreparable breakdown of a personal relationship between shareholders was noted as providing a good cause for

winding-up of a company. The granting of a winding-up order under s111bis involved not only a consideration of

the merits of the matter but a broad conclusion of the law, justice and equity.‘66

From the above we can see that not only were the requirements onerous in that it required the

applicant to prove ‗oppressive conduct‘ and to prove that this conduct justified the winding-up of

the company but it also gave the applicant, if successful, very limited recourse as the courts were

restricted to winding-up of the company.

59


Section 111bis of Act 46 of 1926. 61


Section 994 of the English Companies Act 2006 and section 241 of the Canadian Business Corporation Act R.S.C.

1985. c.C – 44 . 63

Act 46 of 1926. 64

Elder v Elder & Watson Ltd 1952 SC 49 at 54 per L Cooper. 65

Moosa NO v Mavjee Bhawa [1967] (3) SA 131 (T). 66

Moosa supra note 65 at 136H-I.

12

The Companies Act of 192667

required there to be a breakdown of the relationship between the

parties as this was seen as a good cause for winding up the business. However, winding-up was

the only remedy available to the shareholders.68

Other factors that were taken into consideration

were the merits of the matter, law justice and equity.69

This was problematic when it came to

public companies as opposed to private companies who had a strong relationship that was easily

determinable and so was the breakdown. The 1926 Act was later repealed and the Oppression

remedy had seen substantial development.70

The conduct that courts were inclined to approve of as being oppressive had to follow the

specific requirement of being either ‗unjust, harsh or tyrannical‘.71

The above section was repealed and now found its application under S252 of the Old Act of

1973. The reason for this was, as stated above, its restrictive nature in application and

interpretation from its foundation found in the English Companies Act.72

The Old Act73

had broadened the scope of conduct that can be challenged by a disgruntled

shareholder, however, s252 was still restrictive. The position under the Old Act still placed a

heavy burden on the minority shareholder to elicit any relief. The 1973 Act stated the following:

‗Any member of a company who complains that any particular act or omission of a company is unfairly prejudicial,

unjust or inequitable, or that the affairs of the company are being conducted in a manner unfairly prejudicial, unjust

or inequitable to him or to some part of the members of the company, may, make an application to court for an order

under this section.‘74

In Garden Province Friedman J. points out that the minority shareholder seeking redress under

s252(1) needed to establish, not only that the act or omission was unfairly prejudicial on him but,

67

Act 46 of 1926. 68


Ibid. 70


Aspek supra note 36 at 526; see also Marshall v Marshall (Pty) Ltd & others 1954 (3) SA 571 (N) at 580. 72


Act 61 of 1973. 74


13

further, that it was inequitable.75

This, however, is a less onerous requirement than proving that

the conduct complained of by the applicant was ‗oppressive‘ as required by the 1926 Act.76

Apart from the court not willing to grant orders readily, this section was rather onerous and

limited due to the wording. For the minority shareholder to be able to attain satisfaction from the

court, they would bear the onus of proof to prove that the conduct was ‗unfair or prejudicial‘ to

them by the majority as the minority.77

The main issue with this section was its limited

applicability, as it could only be used by applicants who were ‗members‘ at the time of the

alleged misconduct.78

The New Act replaced the word ‗member‘ with ‗shareholder‘ as defined in

s1 of the New Act, however, the terms can be used interchangeably and still have the same

meaning.79

The major shortcoming in the Old Act was the requirement of locus standi. The Old Act required

that, at the time of the alleged misconduct the applicant had to have been a member, as defined

by section 103 of the Old Act. This was attained by being registered and appearing on the

members register.80

The above, in terms of court acceptance, was applicable unless the non-member found difficulty

in attaining such registration due to frustration by the existing members and thus, could apply

under s252 despite this.81

Despite the above, a person who has an interest in a share, whether in a personal or

representative capacity, will not be able to bring an application under s252 due to lack of locus

standi.82

The Old Act, despite its flaws, allowed for further application in certain instances, however, as

can be seen, it did not fulfil the true nature of the Oppression remedy and its intended purpose. In

75

Garden Province supra note 23 at 531. 76

Ibid at 527. 77

Section 252(1) of Act 61 of 1973. 78

The 1973 Act used the word ‗member‘ as defined in section 103. 79

Delport et al Henochsberg on the Companies Act 71 of 2008 (2011) 206. 80

Doornkop Sugar Estates Ltd v Maxwell 1926 WLD 127 134. 81

Barnard v Carl Greaves Brokers (Pty) Ltd 2008 (3) SA 663 (c) 41. 82

Lourenco v Ferela (Pty) Ltd 1998 (3) SA 281 (T) 294 – 295.

14

Bayly v Knowles (Bayly)83

, the court pointed out a very significant diversional approach the

courts took, under s252, as opposed to liquidation by stating:

‗...the way the court can achieve the objects of s252 without taking the drastic step of liquidation is to

order that the majority shareholders purchase the shares of the minority shareholder or for the minority

shareholder to purchase the shares of the majority...84

S25285

eliminated the burden placed on the minority shareholder to prove that the conduct

complained of justified the winding-up of a company, it also allowed a court to make an order if

it was satisfied that the conduct complained of warranted the granting of the relief under the

provision with the view of bringing it to an end.86

The courts under s252 would only intervene if

it was just and equitable to do so, which is illustrated in Donaldson Investments(Pty) Ltd &

others v Anglo-Transvaal Colliers Ltd and others 87

whereby the court stated:

‗…this is perfectly logical; for instance, an act which is unjustly prejudicial may be subsequently rectified or

balanced by subsequent conduct or else it may fall within the provision of the de minimus principle. Accordingly, an

applicant must not only establish that the conduct is unjustly prejudicial, unjust or inequitable, but also that it is just

and equitable that the court should come to his relief…‘88

The court could also impose an order that it deems ‗fit‘.89

The definition of fit, as defined by the

courts, was taken to be wide and with the purpose of bringing an end to the conduct complained

of and have a consequence on the oppressor.90

2.3.2. Oppression Remedy Developed Under the Company Act 71 of 2008

The amendment of the Companies Act has seen many changes from s252 of the Old Act91

which

can now be found under s163 of the New Act.92

The s163 now reads as follows:

83

Bayly v Knowles (ZASCA) unreported case no 174/09 of 18 March 2010. 84

Ibid para 19. 85

Act 61 of 1973. 86


Donaldson Investments (Pty) Ltd & others v Anglo-Transvaal Colliers Ltd & others 1980 (4) SA 204 (T). 88

Ibid 209. 89

Section 252(3) of Act 61 of 1973. 90

Donaldson Investments supra note 87 at 209. 91

Act 61 of 1973. 92

Act 71 of 2008.

15

‗(1) A shareholder or a director of a company may apply to a court for relief if:

(a) Any act or omission of the company, or a related person, has had a result that is

oppressive or unfairly prejudicial to, or that unfairly disregards the interests of the applicant;

(b) The business of the company, or a related person, is being or has been carried on or

conducted in a manner that is oppressive or unfairly prejudicial to, or that unfairly disregards

the interests of, the applicant; or

(c) The powers of a director or prescribed officer of the company, or a person related to the

company, are being or have been exercised in a manner that is oppressive or unfairly

prejudicial to, or that unfairly disregards the interests of, the applicant.‘93

Before looking at the new requirements critically, it is important to note the wide array of

remedies under this section for a successful applicant to see what the courts can now do under

the New Act. Under s163 (2)94

it provides the court the ability to make various orders that it

deems fit in the circumstance to rectify the oppressive or unfairly prejudicial conduct that the

applicant has complained of. These remedies are more extensive than the ones that were

provided for in s252 of the Old Act and include the following interim and final orders:

‘(a) an order restraining the conduct complained of;

(b) an order appointing a liquidator, if the company appears to be insolvent;

(c) an order placing the company under supervision and commencing business rescue proceedings

in terms of Chapter 6, if the court is satisfied that the circumstances set out in section 131(4)(a)

apply;

(d) an order to regulate the company‘s affairs by directing the company to amend its

Memorandum of Incorporation or to create or amend a unanimous shareholder agreement;

(e) an order directing an issue or exchange of shares;

(f) an order—

(i) appointing directors in place of or in addition to all or any of the directors then in

office; or

93

Sections 163 (1) (a) – (c) of Act 71 of 2008. 94

Ibid; see also sections 163 (2) (a) – (l) of Act 71 of 2008.

16

(ii) declaring any person delinquent or under probation, as contemplated in section 162;

(g) an order directing the company or any other person to restore to a shareholder any part of the

consideration that the shareholder paid for shares, or pay the equivalent value, with or without

conditions;

(h) an order varying or setting aside a transaction or an agreement to which the company is a

party and compensating the company or any other party to the transaction or agreement;

(i) an order requiring the company, within a time specified by the court, to produce to the court or

an interested person financial statements in a form required by this Act, or an accounting in any

other form the court may determine;

(j) an order to pay compensation to an aggrieved person, subject to any other law entitling that

person to compensation;

(k) an order directing rectification of the registers or other records of a company; or

(l) an order for the trial of any issue as determined by the court.‘95

From the above we can see the type of remedies are extremely comprehensive and involve

minimal judicial intervention but also, they allow the court to make any decision that the court

deems appropriate if the relief is not found under this section.96

This allows the court to decide

each case on a case-by-case basis and, as is known, legislature does not always provide for every

case or situation that the court may face, thus granting the court the opportunity and discretion

that it requires to make a fair and just order.97

The order(s) which a court can/will grant is discussed later on in this chapter. However, for a

court to grant any order it deems fit, the applicant will first have to satisfy the requirements that

are set out s163 (1).98

In Count Gotthard SA Pilati v Witfontein Game Farm (Pty) Ltd (Count Gotthard) 99

case, the

court in summary emphasised the need for all the requirements under the section to be fulfilled

95

Sections 163 (a) - (l) of Act 71 of 2008; see also FHI Cassim et al op cit note 2 at 773. 96

A Sibanda op cit note 19 at 409; see also FHI Cassim et al op cit note 2 at 759. 97

Ibid. 98

Section 163(1) of Act 71 of 2008. 99

Count Gotthard SA Pilati v Witfontein Game Farm (Pty) Ltd [2013] 2 All SA 190 (GNP) 28 para 17.6.

17

for the applicant, including the requirement that the applicant needed to be a shareholder or a

director, to find success when applying to the court.100

The amendments that are brought about by the New Act have also seen some critical review by

academic writers. One article which was helpful in assisting in the amendments and the problems

associated with the requirements was the critical analysis of the Peel v Hamon J&C Engineering

(Pty) Ltd (Peel).101

This case was the second case that dealt with the Oppression remedy and the

court was faced with a complex set of facts and needed to answer questions regarding the

application of s163 and the requirements that needed to be satisfied to be successful under this

section.102

To understand the reasoning behind the problems noted by the authors, we looked at the

amendments that the New Act incorporated. There are many distinctions between the Old Act

and the New. These distinctions relate to the requirements that need to be met in order for an

applicant to be successful.

2.3.2.1 Applicants Who Can Apply Under s163

The first distinction is the extension of locus standi. The amendment to the wording of the New

Act allows for broader application. The term ‗member‘ which was found in the Old Act was the

reason for limited application.103

This is now replaced with the word ‗shareholder‘ and is

applicable to not only shareholders of the company but also directors of the company.104

Despite

the fact that the requirements for locus standi have broadened, it is still restrictive in the sense

that the applicant still is required to be a registered shareholder. Thus, a party who has simply an

interest will not have the required locus standi to be an applicant under s163.105

This can be seen

as a means of Oppression on individuals who are not registered members but have an interest

through a will or in the capacity of an executor or trustee.106

100

HGJ Beukes & WJC Swart ‗Peel v Hamon J&C Engineering (Pty) Ltd: Ignoring the result requirement of section

163(1)(a) of the Companies Act and extending the oppression remedy beyond its statutory intended reach‘ (2014)

17(4) Potchefstroom Electronic Law Journal 1697-1698. 101

Peel v Hamon J&C Engineering (Pty) Ltd [2013] 2 SA 331 (GSJ). 102

HGJ Beukes & WJC Swart op cit note 100 at 1691. 103

A ‗member‘ as defined by section 103 of the Company Act 61 of 1973. 104

Section 163(1) of Act 71 of 2008. 105


MJ Oosthuisen op cit note 57 at 109.

18

The above extension was overdue in South African law, taking into consideration that other

jurisdictions have incorporated it into their scope. Such as England, which South Africa has

followed because there are many similarities between s994 of the English Companies Act and

s252 of the Old Act and s163 of the New Act.107

The main argument Sibanda makes for the extension is that many directors, in majority of the

cases in South Africa, found themselves having no recourse against oppressive conduct under the

Old Act,108

which only catered for minority shareholders and were forced to leave their positions

making the Oppression remedy not very effective in assisting the disgruntled shareholders.109

Cassim also points out that a de facto110

director will now be able to utilise this remedy.

The New Act further allows an applicant to bring a single application whereas the Old Act

required there be more than one applicant.111

The writer is in agreement with the above submissions as minority shareholder(s) do not always

find themselves in dispute with the majority. There are instances whereby the shareholder

forming part of the majority does not agree or fails to vote in favour of a resolution thus making

them their own minority. This was not thought of when legislature was drafting the 1926 Act112

or the Old Act.113

The inclusion of ‗any shareholder‘ and the removal of the requirement that the

conduct must be done to them as a minority is a step in the right direction. It not only broadens

the scope but takes away the stigma that only minority shareholders are faced with problems in a

company.

Authors such as Cassim114

expand the scope of applicant further and imply that even if the

applicant is not a shareholder or director at the time of the alleged misconduct, but become so

after, they may still apply to court for relief under this section.

Beukes and Swart115

highlight and make a valid point on limiting the interpretation of locus

standi to apply to current directors and shareholders at the time of the misconduct. Their

107

Gower and Davies’ Principles of Modern Company Law 8 ed (2008). 108




MJ Oosthuisen op cit note 57 at 121. 112

Act 46 of 1926. 113

Act 61 of 1973. 114

FHI Cassim et al op cit note 96.

19

reasoning behind it is the unfortunate event of allowing each and every individual shareholder

(or not) to apply to court under this section and thus opening the ‗flood gates‘ and burdening

courts with unfounded claims.116

They are of the opinion that legislature extended locus standi to

shareholders and directors and/or affected parties are correct but further expansion is not their

intention.117

In Lourenco and Others v Ferela (Pty) Ltd (Lourenco),118

the applicants were denied locus

standi, even though they were owners of the shares by means of a will, because they had not yet

become members of the company.119

This can be seen as a huge disadvantage to people who are

aware of unfair and prejudicial conduct occurring prior to their appointment as members. The

writer submits that this is correct as individuals who have still not joined the company may be

unaware of the company‘s reasons and rationale when the decision was made which can create

unfounded claims on insufficient facts. The purpose of legislature was to allow a shareholder

recourse which, in essence, means that they were a part of the decision-making process and at the

time they were fully aware factually of the reasons and motives of such a decision.

Authors such as Sibanda are of the view that the above is incorrect and that current shareholders

may commit acts that are to the detriment of pre-registered shareholders.120

He also points out

that the process of obtaining a shareholders‘ certificate is long and tedious and thus, future

shareholders should be afforded protection under this section and, if not, the purpose and aim of

the New Act121

are not fulfilled.122

This can be seen in private companies whereby the majority

may frustrate and cause internal frustration by disallowing the registration of shares.

Cassim123

points out an important analysis that the court may deviate from the requirement

should the court be shown that the shareholders would have been registered had it not been for

the frustration caused by the current shareholders or controlling powers. It is noteworthy that the

115


Ibid. 117

Ibid. 118

Lourenco & others v Ferela (Pty) Ltd [1998] (3) SA 281 (T). 119



Act 71 of 2008. 122


FHI Cassim et al op cit note 96; see also Barnard v Carl Greeves (Pty) Ltd 2008 (3) SA 663 – a case pointed out

by Cassim to show that the principle that was once decided under the old Act may still be applicable under the New

Act.

20

New Act allows judicial discretion for these types of situations and to avoid a block-out due to

the non-shareholders facing the element of exclusion under the Act, even though not due to their

doing.

Another great development that the extension of standing brought about is the ability for ‗related

persons‘ to apply.124

This extends not only to the shareholders of the affected company but also

to ‗subsidiary company‘.125

Beukes and Swart disagree with the above and point out on this aspect that the remedy itself

needs to be protected from misuse and ‗as a means of Oppression‘.126

The question of whether or not locus standi extends to non-members or future shareholders is

still unanswered and unclear127

and is open to interpretation and legislative guidance.

2.3.2.2. Conduct – Analysis of Domestic and International Legislature

The next change that was brought about was the relaxation of what shareholders had to prove.

Cassim128

has defined conduct as including ‗acts, omissions, the conducting of business or the

exercise of power.‘

The ‗oppressive conduct‘ has now been broadened to also include ‗unfairly disregards‘ his or her

interest.129

Sibanda points out that ‗the inclusion of a member‘s interest in the provision enables

the remedy to now address instances involving an infringement of enumerated rights of

shareholders.‘130

He goes on further to state that now rights also include ‗legitimate expectations‘

and that English case law has confirmed this.131

124


Ibid. 126


Ibid. 128


HGJ Beukes & WJC Swart op cit note 126. 130


Ibid.

21

Canadian exercise of the Oppression remedy is broader in all senses. It allows shareholders who

are not only disgruntled by an act or omission but includes the event of their expectations not

being met.132

In regards to Canadian Corporations, Ben-Ishai is of the opinion that the Oppression remedy has

great potential when dealing with unequal power relations in both private and publicly-traded

companies, provided that the litigants and judiciary extend their knowledge when dealing with

such cases.133

Under Canadian law, the controlling members are given extensive power which

allows them to realise the best interest of the company.

Ben-Ishai claims that, if the protection of shareholders is not matched with equivalent remedial

action, this may create the opportunity for purposeful exploitation by the corporation of

shareholders and thus, could create the eventuality of disregarding the interests of non-

shareholders altogether.134

There is much appeal in restricting the Oppression remedy to minority shareholders of private

companies rather than expanding it further to encompass both private and public and non-

shareholders, due to procedural issues. However, its expansion will give broader application and

reflect the intention of the Oppression remedy and allow protection of interests to all

shareholders.135

Ben-Ishai gives an explanation as to why, generally, there is an inapplicability of the Oppression

remedy to public companies by highlighting the power disparity between the board of directors

and shareholders. The power that the board of directors‘ holds is equivalent to that of a majority

whom have little shareholder intervention whereas, in a private company, the board is often

answerable to or dependent on the shareholders. Thus, majority shareholders may be able to

make decisions that the board has to follow, which may adversely affect the minority.136

132

B Welling Corporate Law in Canada – The Governing Principles 3 ed (2006) 535. 133

S Ben-Ishai ‗The promise of the oppression remedy: A review of Markus Koehnen's oppression and related

remedies‘ (2005) 42(3) Canadian Business Law Journal 451. 134

Ibid at 452. 135

S Ben-Ishai op cit note 133 at 462. 136

Ibid at 455.

22

The main argument against reasonable expectations is its inability to provide a concrete method

of application and form an objective basis. It can be used as a means of understanding a problem

or a conflict. It is an open-ended concept that cannot be restricted to allow application in law.137

Conduct as defined in the New Act138

is broader and allows for further application. In terms of

the New Act, the ‗act or omission must be oppressive, unfairly prejudicial and/or unfairly

disregard the interests of the applicant‘.139

This shows development compared to the Old Act which stated that for the applicant to find

success, (s)he needed to prove that the conduct was unfairly prejudicial to them as a minority,

which placed less focus on the conduct and the effect but gave an eventuality which needed to be

fulfilled, thus narrowing its application.140

The above is confirmed in Louw v Nel (Louw) 141

whereby the court stated that under s252 of the

Old Act an applicant needed to prove that the act or omission was committed or the affairs of

business was done in a way that had the effect of being unfairly prejudicial, unjust or inequitable

to him or some part of the members of the company.142

The New Act further expands conduct to business of the company or by any related person and

even the powers of the directors that are being carried on in a manner that is unfairly oppressive

and/or unfairly prejudicial to the applicant.143

As can be seen from the wording of the New Act,

the requirements don‘t place emphasis on the conduct but rather the outcome of such conduct.

In Grancy Property Ltd v Manala (Grancy)144

the court, when determining conduct, stated that it

is not the motive of the conduct that is important but rather the effect that such conduct has had

on the shareholder, thus allowing the court to have wider discretion when determining

conduct.145

137

H Bailey Kuklin ‗The plausibility of legally protecting reasonable expectations‘ (1997) 32 (1) 61-66. 138

Act 71 of 2008. 139

Section 163(1) (a) of Act 71 of 2008. 140

Section 252(1) of Act 61 of 1973. 141

Louw v Nel 2011 2 SA 172 (SCA) para 19; 19.1. 142


Ibid; see also sections 163 (1) (a)-(c) of Act 71 of 2008. 144

Grancy Property Ltd v Manala 2015 (3) SA 313 (SCA). 145

Ibid para 27.

23

The above is a Supreme Court judgment and has shown that the need for protection is far greater

than the reasons as to why such conduct, whether it was an act or an omission, was committed.

Sibanda has alluded to the fact that inclusion of ‗unfairly disregards the interest of the applicant‘

brings about wider application and was not available under the Old Act146

and further states that

this shows the importance of shareholders interest which are ‗wider‘ than shareholders rights and

thus, includes legitimate expectations of shareholders.147

In Ebrahimi v Westbourne Galleries (Ebrahimi),148

the court stated that ‗legitimate expectations‘

are a sui generis class of rights that go beyond the scope of shareholders and that it is a

relationship, of a personal nature, between individuals which will cause an unfair prejudice if it

is not honored.149

‗In Canada, federal and provincial statutes provide for dramatically broader Oppression remedies against Canadian

corporations to address a potentially unlimited array of unfair conduct. Oppression claims can be asserted by

practically any ‗stakeholder‘ for corporate actions that infringe on the stakeholder's legitimate expectations‘.150

From this, we can see that other jurisdictions place high importance on the protection of

shareholders by allowing broader application so that applicants stand a better chance of

succeeding in their claims. This shows the broad application of the requirements in other

jurisdictions that aim to encompass all situations which arise in a company relating to

shareholders. The writer agrees with this insight and submits that it is a step to formulating a

broad but controlled statute that will allow all parties to seek relief under the Act.

With regards to the requirement of conduct, authors believe that the result should be a single

result and not a multitude of results that need to occur.151

Here, the authors agreed with the court

in Kudumane Investment Holding Ltd v Northern Cape Manganese Company (Pty) Ltd

146

Act 61 of 1973. 147


Ebrahimi v Westbourne Galleries [1972] 2 All ER 492. 149


See https://mcmillan.ca/101573, accessed on 15 September 2018. 151

Ibid.

https://mcmillan.ca/101573

24

(Kudumane),152

which stated that the courts do not require that all results need to be eventuated,

but just one is fulfillment of the requirements to seek remedial action under the New Act.153

2.3.2.3. Remedies Available to the Court to Rectify the Misconduct

Lastly, one of the major advances in the New Act154

is the extensive list of remedies that can be

found under S163 (2).155

Sibanda points out that even though most of the remedies found therein

involve minimal court intervention, it still allows the court to make decisions based on the facts

before it.156

The court is also now able to grant interim orders pending finalization of a matter

which the Old Act did not cater for.157

In Louw,158

the court alluded to the fact that s252159

allowed courts wide discretionary abilities

when it came to rectifying the wrong done to the applicant.160

The court further mentions that the

relief that the court will grant must have the eventuality of ‗putting an end‘ to the conduct

complained of.161

The above, it is submitted shows that remedy placed its application in the hands of the court and

lack of business skills and training on the part of the judiciary was never questioned. Each case

was dealt with on a case-by-case basis and what one court could have found as justified may not

have been the case by another.

Under the Canada Business Corporations Act,162

the Oppression remedy grants courts

discretionary capabilities to go beyond the technical legal rules which binds corporate

shareholders and considers whether a complainant‘s reasonable expectations have been

defeated.163

The discretion reaches as far as allowing the court to order that the corporation or

152

Kudumane Investment Holding Ltd v Northern Cape Manganese Company (Pty) Ltd [2012] 4 All SA 203 (GSJ). 153


Act 71 of 2008. 155

Ibid. 156


Ibid. 158

Louw & others v Nel 2011 (2) SA 172 (SCA). 159

Act 61 of 1973. 160

Louw & others v Nel 2011 (2) SA 173 (SCA). 161

Ibid. 162

Canada Business Corporation Act R.S.C. 1985 C. c-44. 163

S Ben-Ishai op cit note 133 at 450.

25

any other person, purchase securities, compensate an aggrieved person or order an appropriate

remedy to rectify the contested issue by the oppressed party.164

2.4. Conclusion

Under s163 of the New Act165

not only encompasses protection for minority shareholders but

also embraces the change that has been occurring in other, more progressive, jurisdictions.166

It

shows growth and intention of legislature to bring South Africa‘s Company law on-par with

other legal systems.167

The Oppression remedy has found itself developing and advancing, which

shows the need and want for it to be a successful remedial action for disgruntled members of

every rank and level.

164

Ibid. 165

Act 71 of 2008. 166


Ibid.

26

CHAPTER 3: APPRAISAL RIGHTS AND DISSENTING SHAREHOLDERS

3.1. Introduction and Origin

Dissenting shareholders‘ Appraisal right may be defined as

‗the right of dissenting shareholders who do not approve of certain triggering events to have their shares bought out

by the company in cash, at a price reflecting the fair value of the shares, which value in certain cases may be

determined by the judiciary.‘168

The review of current domestic company law was inevitable and much needed. The Department

of Trade Industry brought about such review and proposed changes for company law that has not

been changed since 1973 Old Act.169

One of South Africa‘s newest additions, in terms of

minority protection, was the Appraisal right. It is adopted from developed jurisdictions such as

the United States, New Zealand and, its most recent influencer, Canada.170

The need for

protection of minority shareholders is ever-growing and developing to ensure that a majority

decision, which may have adverse effects or cannot be stopped by a minority, has consequences

in the eyes of the law.

Prior to the enactment of the New Act,171

disgruntled minority shareholders found themselves in

a dangerous position. The court in Sammel v President Brand Gold Mining Co Ltd (Sammel)172

set out the common law position which applied in South Africa as follows:

‗By becoming a shareholder in a company, a person undertakes by his contract to be bound by the decisions of the

prescribed majority of shareholders, if those decisions on the affairs of the company are arrived at in accordance

with the law, even where they adversely affect his own rights as a shareholder. The principle of the supremacy of the

majority is essential to the proper functioning of companies‘173

The above reasoned the reluctant attitude courts adopted when it came to interfering or involving

itself in the internal management of any company.174

The granting of an Appraisal right sought to

balance the unfair restriction placed on a company when deciding to make any fundamental

168


FHI Cassim ‗Unravelling the obscurities of section 38(2)(d) of the Companies Act‘ (2005)122 (3) South African

Law Journal 493. 170

Ibid. 171

Act 71 of 2008. 172

Sammel v President Brand Gold Mining Co Ltd 1969 (3) SA 629 (A) 678. 173

Ibid 678 G-H; see also J Yeats op cit note 47 at 336. 174

Communicare v Khan 2013 (4) SA 482 (SCA) para 10.

27

change. It was previously required that there is not only a majority vote but a ‗unanimous

vote‘175

for such change to be implemented.176

The law now allows the rights attached to the

initially purchased shares be held in sanctity and allows the shareholder the right to protect such

investment interest and the economic risk associated with such share.177

This equalises the

economic arena by not only protecting critical economic change but allowing those involved in

such change the choice to be attached or detached from such.178

The once historical requirement of a ‗unanimous vote‘ was required for mergers and other

fundamental transactions and was finally replaced by ‗majority vote‘ as the new standard.179

The

majority approval sufficed and, as a quid pro quo,180

the dissenting or disgruntled shareholders

are afforded the Appraisal right.181

This can be seen as a remedy to their inability to refuse or

object to being a part of the majority decision.182

The ‗defeated expectations‘183

view was a consequence that many dissenting shareholders

endured if they were unable to leave the company amicably, by having their shares bought out,

but was forced into the new transaction.184

The introduction of cash-out as a merger

consideration also prevents the dissenting shareholders from being inadequately paid out and

thus, can be seen as a ‗remedy-for-unfairness‘ justification.185

The Appraisal remedy now gives the minority an option, one which they were previously not

entitled to, to have their shares bought out for a ‗fair value‘ and allow themselves the freedom to

be in a business that they wish to be a part as opposed to being forced due to financial

differences.186

The Appraisal right not only protects the minority, but also allows internal

management the tractability it requires to adapt to the ever-changing economic environment and

175

H Kanda & S Levmore S ‗The appraisal remedy and the goals of corporate law‘ (1985) 32 at 430. 176

B Manning op cit note 27 at 226-227. 177


Ibid. 179


J Yeats op cit note 47 at 335. 181

Ibid. 182

BM Wertheimer ‗The purpose of the shareholders‘ appraisal remedy‘(1998) 47 (4) Duke Law Journal 66. 183

MF Cassim ‗The introduction of the statutory merger in South African corporate law: Majority rule offset by the

appraisal right‘ (2008) 20 (2) SA Merc LJ 158. 184

Ibid. 185

Ibid. 186

AR Pinto et al Understanding Corporate Law 2ed (1999)127-128.

28

thus, protects the majority, the decision making process of such majority and their voted

decision.187

The Appraisal right can be seen as a defense for dissenting shareholders, but also as a benchmark

for directors or controlling majorities to be wary and avoid making risky business decisions that

may eventually have consequences on the minority.188

It should be recognised by directors or

majority shareholders that the dissenting vote is also of importance when making business

decisions. A company should pay attention to not only the majority way of thinking but the

minority as well, as majority shareholders may have money to lose but a minority may not and

thus, if there is a greater number of dissenting shareholders votes than there are majority

shareholders votes, this should be a warning beacon to the majority of the decision that is going

to made and that it needs to be reviewed.189

The above indicates the three main objectives of the Appraisal right;

1. Facilitates the market for conducive mergers;

2. provides liquidity for dissenting shareholders; and

3. serves as a check on opportunism by the directors and the controlling shareholders.190

From the above there are three main objectives that can be deduced; namely, the option of

having shares bought for a ‗fair market‘ value provided all the requirements under the Appraisal

right are complied with.191

The second objective enables the once-feared judicial intervention

should the value be inadequate or the shareholder require the court to determine ‗fair market

value‘.192

The third objective is to disallow a director from making decisions that may have an

adverse effect on the minority, by curtailing the freedom that a director can attain by title.193

It has been stated that, provided the majority follow the correct protocols and pay the dissenting

shareholders, they can implement any fundamental change with impunity. As the minority would

be able to avoid being party to change that they don‘t agree with, however, if enough

shareholders objected to the resolution being passed they can actively ‗force-stop‘ the change

187

WD Gray The Annotated Canada Business Corporations Act 2 ed (2002) 372.

188 MF Cassim op cit note 183 at 159.

189 Ibid.

190 MF Cassim op cit note 188.

191 FHI Cassim et al op cit 179; J Yeats op cit note 47 at 334.

192 Ibid; see also H Kanda & S Levmore op cit note 175 at 429. ‗

193 Ibid.

29

from occurring.194

The above could be possible, as the obligation to purchase the shares could

inevitably drain the company‘s funds.195

The Appraisal right has been said to have many

concerns on the part of majority shareholders such as ‗frightful drain, burden and nuisance‘ that

comes with the remedy.196

The Appraisal statutes can be seen as a ‗barricade‘ for minority rights or as a tool to enable a

faster means of ‗majoritarianism‘ all dependent on its application and management.197

It also

encourages investors with small capital input to invest knowing that they would be adequately

protected against a majority reign.198

3.2 Appraisal Remedy and its Application Under s164

The Appraisal right makes its first appearance in domestic company law under the New Act.199

It

has seen long-standing application under many foreign jurisdictions and has recent application in

Canada and New Zealand.200

The Appraisal remedy, as stated above, is a crucial remedy for dissenting shareholders who are

challenged with unfairness in a company.201

Hence, if a dissenting shareholder is offered an

amount for their shares in a company and is dissatisfied with said amount, (s)he may now

challenge the fair value of the offer judicially.202

As with every piece of legislature, there is a

downside for applicants seeking relief under this section, as the remedy has been criticised for

being expensive, time-consuming and procedurally dreadful.203

The remedy is based on strict

compliance and is technical in nature.204

194

JG MacIntosh ‗The shareholders‘ appraisal rights in Canada: A critical reappraisal‘ (1986) Vol 24(2) Osgoode

Hall Law Journal 205. 195

B Manning op cit note 27 at 241. 196

Ibid at 234; see also J Yeats op cit note 47 at 331. 197

B Manning op cit note 27 at 230. 198

J Yeats op cit note 196. 199

MF Cassim op cit note 183 at 19. 200

Ibid. 201


Ibid. 203

FHI Cassim et al op cit note 2 at 798; see also J Yeats op cit note 47 at 332; see also V Brudney & MA

Chirelstein ‗Fair shares in corporate mergers and takeover‘ (1974) 88 (2) 304. 204

Ibid.

30

Due to this, there is a fine line between effectiveness and, essentially, from the protection that it

should be able to afford the minority.205

It has been argued that the Appraisal procedure needs to

be followed meticulously to find application and this can be seen as a deterrent to potential

applicants.206

Despite the above, the Appraisal remedy is seen as a means of not only protecting the minority

but, allowing the majority the freedom it requires to conclude desired transactions without

having to avoid potential successes due to fear of the minority rising up for reasons unbeknown

or that are personal in nature.

To find application under s164, it is a pre-requisite that certain triggering events need to unfold

before this right is applicable, as it does not have general application.207

An Appraisal right is

triggered when a notice is given by a company to shareholders indicating that a meeting will be

held to adopt a crucial change.208

Included in such a notice should be an indication of the

shareholders‘ rights possessed under this section.209

It should be noted that business rescue

procedures are exempt under this section.210

Under Canadian corporate law, the Appraisal right is addressed as the ‗Procedural Morass‘.211

Its

adoption was also founded on the new merger provisions and to enable flexible and an efficient

economy.212

Legislature has borrowed a large part of the Canadian jurisprudence when drafting

the Appraisal right under the New Act.213

The CCBA214

created the equivalent Appraisal right on

the basis that it not only protect the minority against discrimination, but also conserves flexibility

205




Sections 164 (2) (a) and (b) of Act 71 of 2008. 209

Sectio 164 (2) (b) of Act 71 of 2008. 210

Section 164 (1) of Act 71 of 2008. 211

B Welling op cit note 132 at 568. 212

Notice of intention to introduce a Bill into Parliament; Explanatory Summary of Bill General Notice 166 of 2007;

page 13 213

Canada Business Corporation Act RSC 1985 c. C – 44 s190. 214

Canada Business Corporation Act.

31

in order to facilitate company change.215

We find great similarity in terms of legal principles set

out under of s190 of the CBCA and in s164 regarding locus standi.216

The Appraisal remedy does have initial safe-guards that need to be met prior to the Appraisal

right being applicable. This can be seen as a preliminary enquiry before the penultimate right can

be activated. The Applicant, in essence, needs to ‗perfect‘ the Appraisal right in order to find

application under this section.217

This entails that the dissenting shareholder actually votes

against the resolution and, thereafter, is required to provide written demand that his/her shares be

bought out at a fair market value.218

This is done once the resolution has been implemented and

all procedural requirements, in terms of this section, are complied with.219

The additional requirement, which was called the ‗no Appraisal threshold‘,220

stated that there

needed to be an approved majority vote of less than 75 percent.221

This had been criticised as

being a vehicle towards unfairness against the dissenting shareholder(s). For example, the

majority shareholder has controlling shares of 75 percent or more to be voted.222

This had

detrimental effects to the Appraisal right by giving no application to the Appraisal right for a

dissenting shareholder, hence the abandonment of the requirement.223

3.3 Trigger Events to Initiate the Appraisal Right

The Appraisal right is not a general right and is only triggered in certain circumstances. The

Appraisal right is only triggered under circumstances when the company proposes to pass a

special resolution to:

1. ‗Dispose of all or the greater part of its assets or undertaking;

2. Enter into an amalgamation or merger;

3. Implement a scheme or arrangement; or

215

JG MacIntosh op cit note 194 at 205. 216

HGJ Beukes ‗An introduction to the appraisal remedy in the Companies Act 2008: Standing and the appraisal

procedure‘ (2010) 22 SA Merc LJ 178. 217


Ibid at 798. 219

Ibid. 220


Ibid. 222


Ibid.

32

4. Amend its Memorandum of Incorporation by changing the preferences, rights,

limitations or other terms of any class of its shares in any manner materially adverse

to the rights or the interests of holders of that class of shares (as contemplated in

Section 37(8) of the Act‘.224

The Appraisal right is not driven by ‗fault or unfairness‘,225

as seen with the Oppression remedy

under s163 of the New Act. It is important to note that the dissenting shareholder is only entitled

to demand the fair value of his shares if a resolution which effects change is adopted. However, a

dissenting shareholder has the responsibility of making his objection to a proposed resolution,

known to the company, as soon as he is aware of the said proposed resolution.226

Surprisingly,

there is no differentiation between public and private companies, even considering the fact that a

dissenting shareholder of a public company has the option of selling their shares on an open

market. Section 164(1) read with Section 152 of the act specifically excludes any transaction,

agreement or offer which relates to a business rescue plan that has been approved by the

shareholders of the company.227

3.4 Procedural Requirements of the Appraisal Remedy

As elaborated on above, for successful application of the Appraisal right certain requirements

need to be complied with as set out in s164 of the New Act.228

It requires meticulous timing,

accuracy and full compliancy. In terms of the CBCA, it is fundamental that the shareholder

comply with all the requirements which include notices and deadlines; failure results in the

shareholders being ‗disentitled‘ from finding application in terms of his or her Appraisal right.229

224

FHI Cassim et al op cit note 217; see also J Yeats op cit note 191. 225

Ibid. 226


Ibid. 228


JG MacIntosh op cit note 194 at 257.

33

3.4.1 Legal Standing

It should be common cause but noteworthy that Beukes points out, for a shareholder to find

application under s164 (s)he needs to be a shareholder and has to dissent.230

In terms of s1 of the

New Act, a shareholder is defined as a ‗holder of a share issued by a company‘231

and a share is

defined as ‗one of the units into which the proprietary interest in a profit company is divided‘.232

The New Act does not include in the term shareholders, a member of non-profit organisation‘s

(hereinafter referred to as NGOs), however, it will apply to the non-profit organisation should

such an organisation have shares in a profit company.233

The final requirement relates to one of the trigger events, the alteration of a class of rights in the

Memorandum of Incorporation and the shareholders need to be holders of the class of rights that

will be affected by the alteration.234

Under Canadian jurisprudence, it is a general rule that in order to use the Appraisal right the

person needed to be a registered shareholder at the time the resolution is passed.235

Courts have

not followed this rule strictly and have taken a relaxed approach when dealing with legal

standing.236

One such case is Silber v BRG Precious Metals Inc (Silber),237

whereby the court

granted the dissidents the Appraisal right even though the court was mindful of the fact that they

had attained the title of shareholder after the notice of the proposed meeting had already been

handed. Hence, it was argued that the Appraisal right was not correctly applicable.238

This is a

clear example of court discretion and judicial interpretation which gives effect to the Appraisal

right; however, it can be seen as way of distorting the principle and allowing unsuccessful,

meritless claims instead of being an effective mechanism of governing corporate authority.239

230

HGJ Beukes op cit note 216 at177. 231

Ibid. 232

HGJ Beukes op cit note 230. 233

Ibid. 234

Ibid. 235

DH Peterson Shareholder Remedies in Canada 2 ed (1989) 15.2. 236

Bathurst Norsemines Ltd (NPL) v Pitfield Mackay Ross Ltd (1984) 52 BCLR 115 (BC SC). 237

Silber v BGR Precious Metals Inc (1998) 41 OR (3d) 147 (Gen Div). 238

Ibid at 157. 239

GS Geis ‗An appraisal puzzle‘ (2011) 105 Northwestern U LR 1639.

34

Canadian courts have followed the view that, should the directors of controlling powers intend

on limiting the Appraisal right to shareholders at the time the notice is sent out, they should

actively take steps to indicate such intention in the notice.240

In comparison to domestic corporate law, the New Act is very specific and limits the Appraisal

right to shareholders that are in the share register and/or the a record date, allocated by the

company, for determining the standing that shareholders may or may not have.241

Thus, if a

shareholder becomes registered after the notice, but before the resolution is passed, the

shareholder fulfils the requirements under s164.242

For example, which shareholders are entitled

to receive notice of meetings and are competent to participate in such a meeting.243

Should the

board fail to set such a date, the court will determine the date as being the last date by which the

company needs to give notice.244

It should be noted that shareholders who have acquired a

beneficial interest subsequently are entitled to vote provided the shareholder‘s name is in the

share register.245

A noteworthy domestic case is Abraham Albertus Cilliers v LA Concorde Holdings Ltd.246

Here

the court was required to determine the ability of a holding company to make an application

under s164, should the subordinate company ‗dispose of all of a greater part of its assets‘.247

A brief factual background to the case involved Mr. A. Cilliers, a minority shareholder in La

Concorde Holdings Ltd an application against Respondent and its wholly-owned subsidiary,

KWV South Africa (Pty) Ltd among others, in terms of which he sought to enforce his attempted

exercise of his Appraisal rights against La Concorde.248

KWV wished to dispose of all its

operational assets to a third party.249

This constituted the disposal of all or the greater part of the

assets of both KWV and La Concorde. Accordingly, in terms of the New Act, the proposed

disposal needed to be approved by special resolutions of the shareholders of both the holding

240

Silber v Pointer Exploration Corp (1998) 42 BLR (2d) 149 (Alta QB) at 157. 241

Section 59(1) of the Act 71 of 2008. 242

HGJ Beukes op cit note 216 at 178. 243

Ibid. 244

Section 59(3) of Act 71 of 2008. 245

Section 56(9) of Act 71 of 2008. 246

Cilliers v LA Concorde Holdings Ltd (ZAWCHC) unreported case no 23029/2016 of 14 June 2018. 247

Ibid. 248

Cilliers supra note 246 at paras 4, 5, 6. 249

Ibid para 7.

35

company and its subsidiary. Cilliers objected and voted against the proposed disposal. Cilliers

then sought to exercise his Appraisal rights under s164 of the New Act and demanded that La

Concorde pay the fair value for his shares in La Concorde. La Concorde refused to do so. La

Concorde argued that the Appraisal rights in s164 did not extend to the shareholders of the

holding company who voted against the proposed disposal and that s164 remedies were only

available to the shareholders of the company disposing of all or the greater part of its assets,

namely KWV. The court, in reaching its decision, took into consideration the interpretation of

statutes and quoted the Natal Joint Municipal Pension Fund v N Endumeni Municipality (Natal

Joint Municipal Pension Fund)250

case. The court, in coming to its conclusion, made noteworthy

remarks regarding the applicability of the Appraisal remedy and its application by clearly stating

the need for growth and fairness as stated in the constitution makes it imperative that the words

of legislature are read to give effect to such objectives.251

The court also took into consideration

the mere intention of legislature and pointed out the following:

‗In my view, as a starting point, the only sensible meaning to be ascribed to the phrase, ‗the

holder of any voting rights in a company‘, taking into account its context, purpose, and

background of the Act, is exactly what it says, in plain language, and must be what the legislature

intended it to mean. If the legislature intended the meaning of ‗the holder of any voting rights in a

company‘ to be limited to ‗the holder of voting rights in the disposing company‘, it would have

simply said so. There is in my view, no ambiguity in the Section, nor is there any uncertainty

about it that requires an interpretation, other than the plain meaning. It is more the correct

application than the interpretation of the law‘.252

The above is a clear indication of the courts focus on adequate and effective application of the

Appraisal remedy. It also points out an important aspect of proper protection of all shareholders

who might be affected by a decision they voted against. The court rightfully allowed the

applicant relief under the Appraisal remedy and this is not only an expansion on the requirements

set out in the New Act but also a message to all controlling companies regarding the importance

of proper decision making and decision-making information that needs to be given to not only

the company to which the proposed change is aimed at but all the companies that may be

250

Natal Joint Municipal Pension Fund v N Endumeni Municipality 2012 (4) SA 539. 251

Cilliers supra note 246 para 34 – 45. 252

Ibid para 22.

36

affected by such change. The court indicated an outstanding reason for this by stating the

following:

In the 2007 Company‘s Bill, published by the Department of Trade and Industry, the intention of the

Legislature is recorded in the following terms:

‗3. Corporate efficiency … (c) there should be a remedy to avoid locking in minorities

shareholders in inefficient companies. …

4. Transparency … (c) the law should protect shareholder rights, advance shareholder activism,

and provide enhanced protections for minority shareholders…’253

The above case illustrates the immense want for the successful and all rounded application of the

Appraisal right rather than limiting it to such an extent that the purpose and aim is partially or

completely lost.

3.4.2 Notice of the Right

In terms of s164 of the New Act, it does not require the company to give prior notice of the place

where the meeting will be held to discuss the proposed resolution, however, it does require that

the company, in terms of s164(2), indicate the right that the shareholder has in terms of the

Appraisal remedy.254

This is not as simple when the company intends on disposing of all or a

greater part of the assets and/or undertakings of a company.255

The New Act does not give a prescribed form of notice that must be followed, however, s65(4)

of the New Act indicates that the proposed resolution needs to be set out ‗clearly, sufficiently

and include sufficient material to enable the shareholders to vote on said resolution‘.256

In terms

of s6(4)(b), if there is no prescribed form for the notice, it must be done so in ‗plain language‘.257

Plain language is competent for ‗prospectus, notice, disclosure or a document, if the company‘s

253

Cilliers supra note para 45. 254

FHI Cassim et al op cit note 2 at 800; see also HGJ Beukes op cit note 216 at 174. 255


Section 65(4) of Act 71 of 2008. 257

Section 6(4) (a) of Act 71 of 2008.

37

shareholders who shall read such are reasonably expected to understand and comprehend such

language‘.258

If the company fails to give reference to s164 or does not fulfil the requirements set out in s6(4),

the notice will be materially defective, however, be that as it may, all shareholders who had

accepted the notice and are present at the meeting do possess the capability of ratifying such

defect and the meeting will continue as planned.259

Should the risk arise that a dissenting

shareholder not be willing to ratify such defect, and the defect is with regards to a certain aspect,

such defect can be removed in accordance with s62(5)(a), and the notice will remain valid.260

In relation to Canadian Jurisprudence, s190(5) of the CBCA requires adequate information on

the Appraisal right to be given to the shareholders and one of the important aspects that needs to

be pointed out clearly is the right to cash-out element.261

Canadian courts have further pointed

out that giving an indication that the shareholders are allowed to vote against the resolution does

not qualify as sufficient notice.262

3.4.3 Notice of Objection by Dissenting Shareholder(s)

Once notice has been sent out and shareholders have intention of voting against the resolution,

there is an obligation placed on such dissenting shareholders to indicate such intention, in terms

of s164(3), by way of ‗written‘ notice, prior to the resolution being voted on.263

Academics have pointed out that in terms of s164(5)(a)(i), a dissenting shareholder is allowed to

demand payment if the notice of objection was ‗sent‘, this makes no indication of the

requirement that notice has to be ‗written‘.264

This is a strange analysis as it is further pointed out

that the notice can also be sent via voice message.265

One of the reasons given for the suggested

‗written notice‘ of objection is mere courtesy, on the part of both parties, whereby the dissenting

258

Section 6 (5) of Act 71 of 2008. 259


Ibid. 261

Section 190 (5) of the Canadian Business Corporation Act. 262

Fitch v Churchill Corp (1990) 4 WWR 256. 263

Section 164 (3) of Act 71 of 2008. 264


Ibid.

38

shareholders has adequately informed the majority and the majority in return will notify the

dissenting shareholders when the resolution has been passed.266

In terms of Canadian jurisprudence, it has been stated that there is a possibility that if the notice

is given after the fact, shareholders might be influenced or intimidated by the number of votes

for the resolution and eventually back out of objecting.267

In terms of s190(5) of the CBCA the

objection needs to be done at the proposed meeting or prior to the proposed meeting being

held.268

In terms of s164(3), written notice ‗may‘ be given prior to the meeting and even though the

requirement seems laidback, it should not be overlooked as, should the dissenting shareholders

fail to give such notice, they may stand the possibility of losing the Appraisal right.269

An

explanation for the word ‗may‘ could be found in the mere fact that the dissenting shareholders

have not received the notice or that they cannot make such a decision because they are simply

unaware of their rights under s164.270

If the dissenting shareholders fail to give the required

notice of objection, they are obliged to do so at the earliest time before the resolution is to be put

to a vote.271

A dissenting shareholder‘s presence at the proposed meeting is not required by s164, however, in

terms of s37(8)(b), it is mandatory due to the nature and effect of the meeting‘s agenda.272

It is

important to note that if a dissenting shareholder intends on objecting, they should do so in full.

The New Act makes no provision for ‗partial dissent‘ and thus, is unclear. However, legislature

has worded s164(5) to mean ‗all shares‘ which may indicate that the shareholder may not be

allowed to demand that certain shares of theirs are to be bought and not in its entirety.273

Thus, a

266


Denischuk v Bonn Energy Corp (1983) 30 Sask R 37 (QB) 39. 268

Section 190 (5) of the Canadian Business Corporation Act. 269

FHI Cassim et al op cit note 254; see also section 164(5), and section 37(8) which indicates that the dissenting

shareholder needs to give advance notice of their intention to object and section 115(8) notice is required before any

further action can be taken in terms of any other triggering events. 270

HGJ Beukes op cit note 216 at 182; see also FHI Cassim et al op cit note 2 at 801. 271



Section 164(5) of Act 71 of 2008; see also HGJ Beukes op cit note 270.

39

shareholder may not be able to use some of his voting rights for the resolution and some

against.274

In terms of Canadian jurisprudence, it is quite the opposite. The CBCA authorises partial dissent,

as s190(4) stipulates that a dissident may be able to dissent on a class of shares. Thus, if

shareholders have other class shares, the Appraisal right will be operable only on the class that

the shareholders choose to appraise.275

Some case considerations have allowed an ‗informal

letter‘ as a means of notifying the company of the objection and found in favour of dissidents.276

3.4.4. Notice of Adoption of the Resolution

The Appraisal right is only afforded if there is a trigger event. In terms of the New Act under

s164(9)(c) a company can revoke the resolution at any time and thus, the right will no longer be

applicable.277

The right also is subsequently no longer applicable if at the meeting the dissenting

shareholders decide that they will no longer be objecting or withdraws their demand.278

Canadian

jurisprudence requires a simple ‗stop‘ in any further Appraisal proceedings on the part of

dissent.279

Once the meeting has finalised and the resolution has been adopted, the New Act requires that

notice be given within ten business days.280

This notice also needs to be circulated amongst those

shareholders who have either objected, withdrew the notice or voted in favour of the

resolution.281

However, should notice not be given the company will not endure any adverse

effects.282

3.4.5. Demand

At this stage, the dissenting shareholders would have complied with all the procedural

requirements relating to the Appraisal right. The resolution, in theory, has been adopted and the

dissenting shareholders can now demand that the company buy them out by purchasing the

274

Ibid. 275

Section 190 (4) of the Canadian Business Corporations Act. 276

Jepson v. The Canadian Salt Company Ltd (1979), 7 B.L.R. at184. 277

Section 164 (9) (c) of Act 71 of 2008. 278

Section 164 (9) (b) of Act 71 of 2008; see also FHI Cassim et al op cit note 2 at 803. 279

KP Mcguinness The Law and Practice of Canadian Business Corporations 2 ed (2007) 1037. 280

Section 164 (4) of Act 71 of 2008; see also FHI Cassim et al op cit note 2 at 801. 281

Ibid. 282

FHI Cassim et al op cit note 280.

40

shares they acquired. To be successful in the demand process, the dissenting shareholders must

have complied with the following:

1. ‗The shareholder must have sent a notice of objection;

2. Subsequent to the above, the resolution must have been adopted by the company;

3. The dissenting shareholder must have voted against the resolution, as abstinence in the

voting process will not suffice;

4. The dissenting shareholder must have complied with all the procedural requirements of

Section 164; and

5. In the event of an amendment of the company‘s Memorandum of Incorporation in order

to alter a class of rights, the dissenting shareholder must hOldshares of a class that is

materially and adversely affected by the amendment‘.283

It is noteworthy that prior to the enactment of the New Act the draft bill required, as stated

earlier in this chapter, a less than 75 percent support of the resolution threshold and thus, if this

was exceeded, the dissenting shareholders had lost all right to make such demand.284

Once the

abovementioned requirements are fulfilled in its entirety, the dissident, in terms of s 164(7), must

deliver the demand to the company within twenty business days after receiving a notice of

adoption of the resolution or failing receipt of same by the shareholder, within twenty business

days after learning of the adoption of such a resolution.285

It should be clear at this stage that the dissident has no intention to be party to the company‘s

transactions and thus, legislature has stated that once the demand has been given, the dissident

ceases to have any rights with regards to the shares, other than to be paid out a fair market

value.286

Canadian courts have allowed shareholders the right to challenge oppressive actions.287

It has been suggested that, should domestic legislature incorporate this view, dissenting

shareholders may still be able to apply for s163 ‗Oppression remedy‘ recourse, even after the

demand is given.288

283

Ibid. 284

GN 166 GG 29630 of 12 February 2007, clause 165(4)(c); see also FHI Cassim et al op cit note 280. 285

FHI Cassim et al op cit note 280; see also HGJ Beukes op cit note 216 at 160. 286

Section 164(9) of Act 71 of 2008. 287

Brant Investments Ltd v Keeprite Inc (1983) 44 OR (2d) 661 (Ont HC) at 664. 288

HGJ Beukes op cit note 216 at187; see also FHI Cassim et al op cit note 2 at 802.

41

3.4.6. Offer by the Company

Once the demand is sent, the company needs to revert to the dissenting shareholders, within a

period of five days, preceding the demand with an offer that is to be determined by the directors

at a fair market value price. Such price will use the date and time prior to which resolution was

passed and afforded the dissenting shareholders the Appraisal right.289

The offer needs to be

specific to the shares that are demanded to be purchased by the company.290

The offer, if made,

lapses within a period of 30 days from the date after the offer is made.291

Canadian case law has pointed out a crucial aspect with regards to the offer that is given to the

dissident. The offer needs to be a true fair value offer and not what the company views as a

minimum value. Thus, the value needs to be appropriate in accordance with the economic

standpoint at the time that the offer is made.292

It is noteworthy, as stated before, that the company suffers no consequence should written notice

not be adequately sent to dissenting shareholders, if at all.293

This shows a legislative oversight

or an ‗imbalance‘ of requirements. The right in itself offers no protection against unfairness and

deliberate hindrance on the part of the controlling parties of the company.294

The disadvantage that the company suffers is the eventuality of not being able to afford the

amount that the dissenting shareholders are entitled to for a number of reasons.295

If the offer is

inadequate, the dissenting shareholders may apply for judicial intervention for the determination

of fair market value, provided that the offer has not prescribed.296

The right to appear before a

judicial officer is not automatic and only occurs when conflict arises between the dissenting

shareholders and the company when determining what fair market value should be.297

It has been

suggested by Cassim298

that this is one of the ‗finer structures‘ available with the Appraisal right.

289

Section 164 (11) of Act 71 of 2008 subject to the provisions contemplated in section 164 (16). 290



Ford Motor Company of Canada Ltd v Ontario Municipal Employees Retirement Board (1997) 36 OR (3d) 384

(Ont CA) at 401. 293


Ibid. 295

HGJ Beukes op cit note 216 at 187- 188; see also J Yeats op cit note 47. 296



Ibid.

42

This application will be curtailed if the offer was duly accepted, however, the dissenting

shareholders that did not accept it will join the application and the court may also instruct that

certain parties be joined, even after the application has been moved.299

The above is a great possibility and legislature does afford the company adequate protection

against such eventuality. The offer needs to be a fair market value, regardless of the company‘s

ability to pay, however, once the offer is accepted, the company may apply to court to have the

obligation varied on reasonable grounds that the company is unable to pay its debts within the

next year.300

We can see at this stage that there are a limited number of outcomes when the offer

is made and should the offer be adequate it will be accepted and, if not, the dissenting

shareholders do have the option of judicial intervention for determination of such.

3.4.7. Acceptance of the Offer

Once an offer is made, provided that the dissenting shareholders find the offer appropriate and

suitable to the fair market value, the offer must be duly accepted.301

At this point the dissenting

shareholder has accepted his/her exit and upon doing so needs to give to the company what was

purchased. There are in fact two eventualities that will follow dependent on the type of shares the

dissenting shareholders obtained by becoming a shareholder of said company.

In terms of s164(13)(a); the shareholder must either in the case of-

(i) shares evidenced by certificates, tender the relevant share certificates to the company

or the company‘s transfer agent; or

(ii) uncertified shares, take the steps required in terms of section 53 to direct the transfer

of those shares to the company or the company‘s transfer agent.‘302

From the wording set out in the New Act and judicial interpretation, we can deduce that the offer

need not be accepted via written notice but rather by the handing over of the once-acquired

shares.303

It should be duly noted that courts will not endorse the Appraisal right of dissenting

299

Sections 164 (15) (a), (b), (c) (i) of Act 71 of 2008. 300

HGJ Beukes op cit note 216 at 188; see also J Yeats op cit note 47 at 334. 301

FHI Cassim et al op cit note 2 at 805; see also section 164 (13) read with ss 12. 302

Sections 164 (13) (a)(i) and (ii) of Act 71 of 2008; also see FHI Cassim et al op cit note 2 at 805; see also J Yeats

op cit note 47 at 334, 335. 303

Justpoint Nominees (Pty) Ltd & others v Sovereign Food Investments Limited & others (BNS Nominees (Pty) Ltd

and Others Intervening) 2016 ZAECOEHC para 5.

43

shareholders who use the remedy to frustrate the ‗Sovereigns legitimate business strategies and

initiatives.304

If this is found to be the issue, the court will order that the shares be reinstated to

the dissenting shareholders.305

The dissenting shareholder upon acceptance will have to tender their shares, within a period of

30 days, in order for the offer to not lapse.306

The company, once notified of the acceptance, will

have a period of ten days to pay out the amount that was offered if not the offer will lapse and

the dissenting shareholders will be put in the same position they were in prior to the dissent.307

The next part of this dissertation shall explore the scenario of the offer not being accepted by the

dissenting shareholders as the amount that is offered by the company is seen as inappropriate,

insufficient or not made at all.

3.4.8 Determination of ‘Fair Market Value’

The point of the Appraisal right is to allow the dissenting shareholders the ability to avoid a risk

that they no longer want to be associated with.308

If the Appraisal right allows risks in the

application of the right the intention and purpose of the remedy would be, in effect, futile. Hence,

legislature when drafting afforded the appraiser the right to approach courts, prior to the offer

lapsing,309

for a determination of what the offer can be and not what the offer is. The New Act

further iterates that importance of ‗fair‘ by allowing the courts to make an order that shall affect

the payment and avoid any further detriment or frustration on the part of the dissenting

shareholders.310

It should be noted at the start that there is no standard method that the court may apply when

determining ‗fair value‘. It has been suggested that ‗fair value‘ is not one value but comprises of

numerous values and the court will determine, in terms of legislature, ‗a fair value‘ and not ‗the

fair value‘.311

This illustrates the lack in definition with regards to what can be regarded as a ‗fair

304

Ibid para 26. 305

Ibid para 26. 306

FHI Cassim et al op cit note 2 at 804; see also section 164 (12) (b) of Act 71 of 2008; see also J Yeats op cit note

47 at 335, 336. 307

Ibid. 308

V BrudneMA Chirelstein op cit note 203 at 299. 309


Section 164 (14) of Act 71 of 2008. 311

FHI Cassim et al op cit note 2 at 808.

44

value‘. It has been stated by authors such as Yeats312

that the burden of proving that the value

made is in actual fact fair, is in the controlling hands of the company and this has to be shown to

the court.

The court, in addition, will have to make further orders, relating to the shareholders, when

required to determining fair value. These orders will comprise of the following:

‗requiring the dissenting shareholders to either accept the ‗fair value‘ determined

and execute due transfer or withdraw their demands;

requiring the company to pay such ‗fair value‘ to each dissenting shareholder who

has accepted the determination and transferred their respective shares back to the

company‘.313

The above shows the mutual relationship that the company and shareholders have, which is

founded on the acquisition of shares. Even though the court will make a determination on the

requested ‗fair value‘, should there be an unwillingness of the part of all or some of the

dissenting shareholders to accept such determined value, they will be reinstated as shareholders

of the company as it has been reconstructed and with that will be the associated risks and

changes the dissenting shareholders sought to avoid.314

Thus, concluding the objection on the

part of the dissenting shareholders.

The Appraisal remedy is a very well-constructed but inadequately legislated piece of work. It has

the ability to be a great source of protection for dissenting shareholders, however, the lack of

proper direction may lead to its evitable detriment.

3.5. Conclusion

As seen above, the Appraisal right is a fairly new and ‗interpretive‘ piece of legislation. It is a

first-world remedy that now finds its application in our domestic law. Its procedure is technical

and rigid and allows no flaws however, it is not widely used in South Africa yet, and hopefully

312

J Yeats The Effective and Proper Exercise of Appraisal Rights under the South African Companies Act, 2008:

Developing a Strategic Approach through a Study of Comparable Foreign Law (unpublished PhD thesis, UCT

2016) 30. 313


Ibid.

45

the courts and the legal minds will be able to makes its application easy, efficient and less

restrictive.

The positive aspect of its introduction into our domestic law is the ‗option‘ that it now gives

shareholders. In some cases, a company will not be able to function if shareholders had not

invested and seen hope and a good market choice when investing. This now allows shareholders

the ability to remove themselves from a once good investment to a current bad investment based

on eventualities that investors hate to predict.

The Appraisal right shows promise however, it does not cater for all-round protection. The

remedy, as seen above, places very little to no consequences on a company as a whole and yet

this is what the purpose of the remedy is - to make the controlling parties answerable and liable

for their misdemeanors and cut-throat business attitudes.

The other problem with the Appraisal right is the notice requirements its lacks rigidity and is too

broad. It allows room for frustration and encourages futile time wastage on the part of either

party. The notice requirements should be the most stressed function of any right as this allows

the other party to adequately prepare and from the name itself, ‗appraise themselves‘ on the

progress of their right application.

The remedy, as stated above, is new and its development shall be shown in time and practice,

however, the real question still remains as to whether it is warranted in our domestic law or not.

46

CHAPTER 4: CONCLUSION AND RECOMMENDATIONS

The economic environment is complex and competitive however, fair competition and decision

making is crucial for its well-balanced existence. The Companies Act 71 of 2008 sought to

combine both fair conduct and beneficial gain by providing a comprehensive and detailed set of

rules and procedures to govern such conduct. The corporate sector in South Africa is ever-

growing hence the need for a diverse and inclusive legal system that allows for wide application.

This can be seen by the extension of the Oppression remedy under section 163 and the inclusion

of the Appraisal remedy under section 164.

The application and content of the two remedial processes have been discussed in the previous

chapters thus leading to two critical questions:

4.1.1 Is the extension of the Oppression remedy found under section 163 of the

New Companies Act warranted in South Africa? and

4.1.2 Is the inclusion of the Appraisal remedy found under section 164 of the

New Companies Act warranted in South Africa?

4.1. The Extension of the Oppression Remedy

The extension of Oppression remedy is warranted and much needed. The problem arises when

applied. Its predecessor Acts have been seen as restrictive, narrow and not accommodating to all

shareholders that have been wronged or experienced foul-play during the decision-making

process. The New Act not only encompasses the need for local trust between shareholders but

also allows foreign shareholders, future or current, to feel protected and thus encourages foreign

investment and faith in our legal system.

The above is true and reflected the need for reform. As stated in chapter two the Oppression

remedy is now far-reaching, not only in its application, but in the wording that forms part of the

New Act. This shows growth and understanding on the part of legislature of the economic

sphere. It has now realised the reality that not only minority shareholders can experience

unfairness but also those who form part of the majority but who are not in agreement with the

rest of the board. Thus, the extension of locus standi to not just members but broadly

shareholders inclusive of directors of a company, who may utilise this remedial process, if they

47

find themselves disgruntled. One of the first cases to deal with the Oppression remedy is the Peel

case.315

Here the court dealt with a unique and complex set of facts which lead to authors316

disagreeing with the court‘s findings.

The facts, in summary, dealt with the applicants contending that the respondents had conducted

themselves in a manner that was unfairly prejudicial and had a result that disregarded their

interests. The crux of the matter dealt with Black Economic Empowerment (BEE). The

Applicants intended to join the respondent‘s business which was to be beneficial for both parties.

The respondent also had a good reputation preceding them with regards to BEE compliance. The

relationship deteriorated to such an extent that both parties no longer wanted to be in business

together. The dispute arose from a number of ‗sham transactions‘317

that the respondent

concluded to attain a BEE score card. The court then had to determine on what basis s163

applied.

Legal Scholars such as Beukes, HGJ and Swart318

disagree with the finding by the court in

relation to the application of s163. They are of the opinion that the applicants did not prove that

the conduct complained of had the result of unjustly disregarding their interests, which is

required by s163(1) of the New Act. This, in summary, meant that the applicants did not abide by

the requirements that are set out in the New Act.

The court, however, took a different approach to the above and found the following:

1. Credibility is vital to ensure that a business continues as a successful concern and that the

respondents did not dispute the allegation made by the applicant that the BEE transaction

was a sham.319

2. Non-disclosure of the improper BEE transaction and the fact that is has not been resolved

meant that the respondents conduct was unfairly prejudicial to applicants and unfairly

disregarded their interests.320

315

Peel supra note 101. 316

HGJ Beukes HGJ & WJC Swart op cit note 100 at 1690. 317

Peel supra note 101 para 19. 318

HGJ Beukes HGJ & WJC Swart op cit note 316. 319

Peel supra note 101 para 57. 320

Ibid para 59.

48

3. The fact that the BEE transaction was a sham meant that the applicants‘ reputation would

be tainted should they continue business with the respondents and thus, the exposure to

such serious risks on the applicants amounted to an unfair prejudice or disregard of the

applicant‘s interests.321

On the face of it, it would seem that the court had applied s163 correctly however, after further

analysis by academic authors it would not seem so apparent. The court broadly applied s163 and

stated ‗...broaden relief rather than limit it‘322

and this is what the abovementioned authors

disagreed with. These scholars are of the opinion that even though the court was correct in

broadening the remedy, it was incorrect by applying it to applicants who failed to prove the

requirements set out in s163(1). They stated the following:

The Oppression remedy is available only if an act or omission by a company or a person related to the

company has had a result that is oppressive or unfairly prejudicial to or that unfairly disregards the interests

of a shareholder or a director of the company; or if the carrying on of the business of the company, or the

exercising of the powers of a director or a prescribed officer of the company is oppressive or unfairly

prejudicial to a shareholder or a director of the company. Relief cannot be granted in terms of subsection

(2) where the requirements of subsection (1) – the specified statutory criteria - have not been satisfied.‘323

From the above, it is deduced that these legal scholars felt that the court had erred in finding

application of s163 in this case and the fact that it is legislatives intention to broaden relief, the

requirements that need to be met to find such application should not be ignored. The reason for

the authors‘ disagreement is twofold;

1. The applicants were not shareholders or directors at the time that the conduct complained

of occurred and that they had joined after the fact.324

2. The result that the court felt unfairly disregarded the applicant‘s interests did not occur

but was a speculation on future events should the applicants stay in business with the

respondent, such result was not apparent but as stated speculative. The authors also felt

that the fact that the court considered serious risk as a result could have detrimental

321

Ibid para 22. 322

Ibid para 52. 323


Ibid at 1700.

49

effects on the proper functioning of the remedy.325

This meant that the applicants had

relied on misrepresentation on the part of the respondent and this did not fulfill the

requirements under s163.326

In conclusion, these legal scholars felt this case should not be regarded as authority for

shareholders who want to find application under the Oppression remedy as it clearly indicates

that the applicant is not required to be a shareholders or director at the time the conduct

complained of is committed. This is rather an example of how a company can be exposed by a

related person how important it is for the company to assess how the conduct of other companies

in the group will impact it.

Cassim327

is also of the opinion that in order for an applicant to find success under this remedy,

the conduct that is complained of needs to be either, conduct that has already occurred or

conduct which has been occurring and that there is no room under this section for conduct that is

yet to be done.328

The above shows consistency in the way academic writers interpret the New Act and that the

court, in some instances, may apply it incorrectly. This not only shows the need for clearer

legislative writing but also the need for proper guidance and training on judicial level to ensure

that acts are being applied correctly and not misinterpreted.

In more recent case law, it has been stated that the court is not required to look at the motive of

the alleged conduct but rather the conduct itself and examine the effect that such conduct has had

on the applicants or other members of the company.329

It has further been stated that the

applicant cannot found his or her allegation on grounds that are not founded or leave the court to

determine the risks associated with such anticipated Oppression.330

The courts have integrated

the interpretational approach of the word ‗conduct‘ which previous courts dealing with the

remedy, under the Old Act, took. In Re Five Minute Car Wash Service Ltd (Five Minute Car

325


Ibid. 327


Ibid at 766. 329

Grancy Property Limited v Manala (665/12) [2013] ZASCA 57 13] ZASCA 57 para 27. 330

Louw v Nel 2011 (2) SA 172 (SCA) para 23.

50

Wash) 331

the court stated that the loss of confidence in a company‘s dealings does not render the

company acting in a manner that is unfairly prejudicial or oppressive.332

The above shows the court following a restrictive approach to the Oppression remedy by

envisioning the thoughts of various academic approaches to the remedy‘s requirements. It also

shows that judicial certainty is attained by continuous and consistent application and

interpretation. It further indicates the unwillingness of courts to accept anticipated Oppression

and their willingness to restrict the remedy to avoid misuse.

The Oppression remedy in other jurisdictions is far wider in application than the remedy found

under our New Act however, it is, in my opinion, that time and thorough juristic application will

either insist on further extension or approve of its current standing in our law. The current

position needs to however, be applied with accuracy and ensure that the intention of legislature is

met. The courts should not allow the remedy to be misused and the floodgates to be opened to

persons who cannot be rightful applicants just because legislature intended the New act to be

broader than its predecessor acts. There are certain requirements and guidelines which need to be

complied with first.

4.1.2 Recommendations

The Oppression remedy has undergone much development in terms of the New Act. The writer

is of the view that there need not be any further changes to the act but rather clarity with regards

to issues such as locus standi, and the concept of anticipated Oppression. It seems as though

legislature had an idea of how to correct the Oppression remedy but not on how judiciary may

apply it. As can be seen above too much judicial discretion may lead to much uncertainty, as

what one may court may deem as falling within the scope of the remedy, another may not.

The writer submits that should the remedy be available to non-members/shareholders it would

lead to external interference on the controlling parties. As the controlling members have more

factual knowledge on the daily running of the business and the reasons behind their decisions,

which may not always be accompanied by immediate gain. This will lead to companies opening

up their decision-making process to the public for scrutiny.

331

Re Five Minute Car Wash Service Ltd (1966) 1 All ER 242. 332

Ibid at 246.

51

The concept of anticipated Oppression is a term that cannot be tamed. There are always risks

involved in the business sphere and for the New Act to cover all such eventualities is near

impossible and would detract from the remedy‘s main purpose and aim, which is to protect

shareholders when they are disgruntled and not when they think they ‗may be‘ disgruntled. This

will allow numerous claims to be lodged and extensive court investigation into matters that may

not have any cause. This will again lead to misuse and abuse of the remedy and eventually a

nuisance for judicial officers and the applicants.

If an applicant wants to exit a business or claim damages from a company, they will eventually

be a part of there are other legal avenues such as contract, delict and other remedial actions that

may be instituted other than the expansion of one remedy to encompass all.

4.2. The Inclusion of the Appraisal Remedy

This type of remedy is an extremely new addition to our law. It is a facet of law that has been

adapted by legal system from far more advanced countries, thus its inclusion has brought

differing opinions. In my opinion, this is a big leap of faith in our judicial system. Successful

application will depend on experience and judicial discretion. Proper application will depend on

research over foreign legal systems that have long-standing experience when adjudicating

matters using the Appraisal remedy.

The writer concurs with legal scholars333

who are of the view that the inclusion of such a remedy,

even though noteworthy, is risky and its overall use may vary depending on the economic

environment in which it is sought and the availability to disgruntled shareholders. This type of

remedial action would work well in advanced financial environments whereby there is no fear on

the part of companies when this type of remedy is sought. The Appraisal remedy has one main

aim and that is to determine the fair value of the shares to be bought.334

Foreign jurisprudence

have not given a precise definition as to what can be regarded as ‗fair value‘ but rather courts use

333

B Manning op cit note; see also J Yeats op cit note 47 at 328; see also M Siegel ‗Back to the future: Appraisal

rights in the Twenty-First Century‘ (1995) Vol 32, Harvard Law Journal; see also E Davids et al ‗A microscopic

analysis of the new merger and amalgamation provisions in the Companies Act 71 of 2008‘ in Tshepo Mongalo (ed)

Modern Company Law for a Competitive South African Economy at 360-361. 334

JC Coates IV ―Fair value‖ as an avoidable rule of corporate law: Minority discounts in conflict transactions‘

(1999) 147 (6) University of Pennsylvania Law Review 1257.

52

a host of methods and valuation techniques introduced either by legal counsels or legal

scholars.335

Thus, following this way of drafting legislature, under domestic law, have not given

direction as to what can be determined as fair value, but rather allows the court power to appoint

appraisers for assistance.336

Lack of application to court under this section in South Africa leaves very little case

evaluation337

. However, the recent Loest v Gendac (Pty) Ltd and another (Loest)338

judgment has

shed some light on the application of the Appraisal right in terms of allowing the applicants

access to certain financial records for the proper determination of the share value and successful

execution of the Appraisal right.

The writer opines that the court had correctly evaluated whether or not s164 allows an applicant

access to financial records, prior to making a court application, for the determination of ‗fair

value‘. The court by indicating that the applicant did not lose his right as a shareholder by mere

election to engage in the protection afforded under the section339

showed understanding and

correct interpretation of s164. The court however had shown relaxation on the requirements,

prior court intervention, which needed to be complied with for the dissenting shareholder to be a

valid applicant.340

Even though the court‘s reasoning was founded on the fact that it was not

required, it is still an important aspect that needs to be complied with for the s164 dissenting

shareholder to be a valid applicant. The court further pointed out that the requirements found

under s164 is ‗…cumbersome‘,341

however it did not lose sight of the fact that the applicant tried

to engage action against the respondents as a ‗…pre-action discovery‘.342

The above case demonstrates the courts unwillingness to allow misuse of the Appraisal remedy.

This is a clear indication of the strict and narrow approach the court will take when determining

what is allowed and disallowed under the section.

335

Ibid at 1251; see also Weinberger v. UOP, Inc. 457 A.2d 701,713 (Del. 1983). 336


J Yeats op cit note 47 at J 339. 338

Loest v Gendac (Pty) Ltd & another 2017 (4) SA 187 (GP). 339

Ibid para 13. 340

Loest v Gendac (Pty) Ltd & another 2017 (4) SA 187 (GP) para 15. 341

Ibid para 20. 342

Loest v Gendac (Pty) Ltd & another 2017 (4) SA 187 (GP) para 35.

53

The lack of judicial application, in essence, indicates that courts will have to consult foreign

judgments in order to hone application skills and knowledge on how such a determination is to

be made and the methods that can and should be used in order to arrive at a fair and just value.

Under Canadian Jurisprudence Cyprus Anvil Mining Corp. v. Dickson (Cyprus) 343

is the leading case

when determining fair value. The court points out the following on the aspect of fair value:

‗… the problem of finding fair value of stock is a special problem in every particular instance. It

defies being reduced to a set of rules for selecting a method of valuation, or a formula or equation

which will produce an answer with the illusion of mathematical certainty. Each case must be

examined on its own facts, and each presents its own difficulties. Factors which may be critically

important in one case may be meaningless in another. Calculations which may be accurate guides

for one stock may be entirely flawed when applied to another stock. The one true rule is to

consider all the evidence that might be helpful, and to consider the particular factors in the

particular case, and to exercise the best judgment that can be brought to bear on all the evidence

and all the factors. I emphasize: it is a question of judgment. No apology need be offered for that.

Parliament has decreed that fair value be determined by the courts and not by some formula that

can be stated in the legislation…In summary, it is my opinion that no method of determining

value which might provide guidance should be rejected. Each formula that might prove useful

should be worked out, using evidence, mathematics, assessment, judgment or whatever is

required. But when all that has been done, the judge is still left only with a mixture of raw

material and processed material on which he must exercise his judgment to determine fair

value…‘344

The writer submits that the main problem besides lack of experience on the part of the judiciary,

is the Rand value when compared to other countries. South Africa has many foreign investors

who, at any time, may pull out from their investments based on our social and political standings.

This would not only set South Africa back economically, but also has a huge impact on the

common man who already finds himself living beyond his means. The success of this remedy or,

rather, the use of this remedy may not be a first choice, if ever, when companies are dealing with

343

Cyprus Anvil Mining Corp. v. Dickson (1986), 8 B.C.L.R. (2d) 145 (C.A.). 344

Ibid at 652; see also J Yeats The Effective and Proper Exercise of Appraisal Rights under the South African

Companies Act, 2008: Developing a Strategic Approach through a Study of Comparable foreign Law (unpublished

PhD thesis, UCT 2016) 110 – 111.

54

shareholders, thus placing pressure on the controlling parties to maintain good relationships

between all shareholders, which can be seen as a positive.

The main idea legislative sought to encapsulate when drafting the New Act is the need for

sufficient and adequate protection for shareholders. However, there are gaps and uncertainty

when dealing with the Appraisal remedy and this will only be rectified in time or end up making

the remedy redundant. The Oppression remedy however, shows promise and sends faith to

existing shareholders in our legal system and the way that it intends on developing however,

judicial officers need to be mindful when interpreting its scope of application to avoid the

remedy being misused and abused.

BIBLIOGRAPHY

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55

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Brant Investments Ltd v Keeprite Inc (1983) 44 OR (2d) 661 (Ont HC)

Communicare v Khan 2013 (4) SA 482 (SCA)

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Donaldson Investments (Pty) Ltd and Others v Anglo-Transvaal Colliers Ltd and Others 1980

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Doornkop Sugar Estates Ltd v Maxwell 1926 WLD 127

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Elder v Elder & Watson Ltd 1952 SC 49

57

Fitch v Churchill Corp (1990) 4 WWR 256

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Garden Province Investment and Others v Aleph (Pty) Ltd and Other 1979 (2) SA 525 (d)

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Websites

https://www.goodreads.com/author/quotes/31693.Samuel_Adams, accessed on 23 October 2018

https://mcmillan.ca/101573, accessed on 15 September 2018

https://www.goodreads.com/author/quotes/31693.Samuel_Adams

https://mcmillan.ca/101573

58

Statutes

Canadian Business Corporation Act R.S.C. 1985. c.C – 44

Companies Act 46 of 1926



English Companies Act 2006 Companies Act

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